How Nigeria’s Three Tiers of Government Shared N2.5 Trillion from Forex Gains in 2023

Nigeria’s federal, state and local governments shared a whopping N2.517 trillion from the Federation Allocation Account Committee (FAAC) in 2023, thanks to the gains from the foreign exchange (forex) market. This was revealed by a review of the FAAC report from January to December 2023.

The report showed that the federation received N2.836 trillion during the year, but deducted N318.29 billion from the non-oil excess account, leaving N2.517 trillion for distribution. Out of this amount, the federal government got N1.211 trillion, the 36 states got N614.49 billion, and the local government areas (LGAs) got N473.92 billion. The eight oil-producing states of Akwa Ibom, Delta, Rivers, Bayelsa, Ondo, Edo, Imo and Abia also received N217.38 billion as 13 per cent derivation.

The report further showed that the FAAC allocation did not include any forex gain from January to April. However, from May to December, the federation recorded a huge forex gain of N2.836 trillion, with the highest amount of N639.39 billion in May. This was the period when the Central Bank of Nigeria (CBN) unified the forex market, a move that analysts called a partial float.

The FAAC report also included forex differential/equalization payments for February, April, and July, which amounted to N246.31 billion. These payments were made to adjust the differences in the exchange rates used for the FAAC allocation. For February, the payment was N120 billion; for April, it was N70 billion; and for July, it was N56.31 billion.

The CBN’s forex policy has been a subject of controversy and debate, as it has affected the value of the Naira. On June 14, 2023, the CBN floated the Naira, which led to a spike to N708 per US dollar on June 21 from N464.5 in May. More recently, on January 26, 2024, the CBN issued a notice of a revision to the FMDQ FX Market Rate Pricing Methodology, which weakened the Naira from N891.90 per US dollar to N1418.78 on Wednesday.